GAO rules against homeland security contract

The Government Accountability Office has thrown a wrench in the Department of Homeland Security's long-running effort to modernize its financial management system, upholding a protest of the department's most recent award.

The decision could be significant for agencies reevaluating their IT programs in the wake of a slate of Office of Management and Budget reviews launched last year. Reston-based Global Computer Enterprises, better known as GCE, won its protest against Arlington-based contracting giant CACI by arguing that the DHS program's requirements had materially changed after the department's review with OMB.

The DHS financial management program has a lengthy history. Technical challenges ended the first try in 2005, no bids were submitted for a second shot in 2007 and the third effort ended in a 2008 court decision that found the department did not properly compete the contract.

In early 2009, the department took another stab at it, releasing a solicitation requiring bidders to propose an "integrated solution" already in use in the federal government. CACI's bid was evaluated technically superior and cheaper but, before the contract was awarded, OMB froze the program, along with many others, for review.

As a result of its review, DHS opted to execute the program in smaller pieces, starting with the Federal Emergency Management Agency. OMB unfroze the program, and DHS promptly awarded the contract, worth up to $450 million, to CACI. GCE and Rockville-based Savantage, which had submitted an early proposal, filed protests with the GAO.

The GAO dismissed Savantage as ineligible to protest because it's not an interested party, but agreed with GCE that the program changes altered the solicitation. The GAO also raised questions about whether CACI's proposal even qualified as an integrated solution already in use.

The GAO has recommended the department revise its solicitation and accept reworked proposals.

"If as a result of the agency's corrective action, CACI's proposal is not found to offer the best value to the government, the agency should terminate CACI's contract and make award to the offeror whose proposal is determined to represent the best value," GAO concluded.

Both CACI and GCE declined to comment.

DHS has not said whether it will act on the GAO's recommendation. In a statement, the department said it is still assessing the findings.

Michael Golden, a partner in Pepper Hamilton's government contracts practice who spent more than 30 years at the GAO, said the case serves as a clear reminder that agencies will need to adjust their acquisition plans if they change their program requirements.

"If OMB is going to be reviewing these major IT acquisitions and as a result, there are changes which affect the mission and the strategy . . . it seems reasonable that the acquisition process has to accommodate that," said Golden.